Life Insurers Get OK for TARP Funds

By Jennifer Malloy Zonnas

LOS ANGELES -- The Treasury Department has agreed to extend billions in bailout funds to six major life insurers, following a months-long quest by some in the sector for government help in shoring up capital positions in the wake of major investment losses.

Hartford Financial (HIG) was the first to disclose Thursday that it had been notified by the Treasury Department that it was eligible for $3.4 billion from the Troubled Asset Relief Program, or TARP. Lincoln National(LNC), which commonly goes by the name Lincoln Financial Group, said it has been initially approved for a $2.5 billion injection from TARP's Capital Purchase Program.

Allstate(ALL), Ameriprise Financial(AMP), Principal Financial (PFG) and Prudential Financial(PRU) also are among insurers receiving preliminary investment approval, Treasury spokesman Andrew Williams confirmed. He declined to disclose the amount of investment each company will receive.

The total capital injection into the six companies will be less than $22 billion, the Wall Street Journal reported, citing a person familiar with the situation.

The $700 billion TARP bailout fund, approved by Congress last year, was originally intended to purchase toxic loans on the books of banks that were inhibiting their ability to make loans. But the fund quickly morphed into a capital backstop fund for banks that also was used by the Treasury Department to make loans to General Motors(GM), Chrysler and insurance giant American International Group(AIG).

Life insurers also requested government aid, worried that their balance sheets had became clogged by illiquid assets and escalating liabilities to policy holders who bought in to this decade's explosion in the variable annuities market. But a final word from the government was slow in arriving, and the stocks of most public insurance companies plunged in recent months.